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How Do I Buy Benefits for Just One Employee?

I am in the planning stages of opening a business. The company will initially have only one employee and be based in Minnesota. I'd like to know how to establish a benefits plan. I realize that several benefit plans are available. I'm battling with what's prudent vs. what's required and what's nice to have vs. what's needed. Also, how should buying benefits change when additional employees are hired?
Different states may have different options, but major carriers usually won't write a policy for an enterprise with fewer than five full-time, eligible employees. Here are two alternatives to consider.



1. Hire a benefits insurance broker, who can look for non-major carriers that might write this insurance for you, such as a local HMO, for example. To find a broker, ask other business owners who they use or request a recommendation from the local chamber of commerce.  



2. Simply provide your employee with a set amount per month with his or her paycheck for the express purpose of purchasing his or her own health insurance. If you go this route, it's a good idea to require proof of insurance from the employee. For example, within 30 days of his or her date of hire, require proof of the amount paid for the insurance coverage. The amount you pay monthly is intended as an offset of some of the insurance cost. It need not cover a specific percentage of what the employee pays. It is like a gift that you are giving, similar to paid time off work for vacation and holidays. Establish an amount and stick with it for everyone you hire.

You might also identify a broker to help the employee with purchasing individual coverage. But this is a nice but not necessary.


If you choose this option, when your company grows to five full-time employees, then you may decide to revisit offering coverage through a broker/major carrier. 

Be aware, however, that typically employers can't please everyone with whatever they offer, no matter how hard they try. 

Offering health coverage is extremely expensive to employers, and it was becoming out of reach for many smaller companies well before the recent federal health-care law was passed. Letting people find and select the coverage that they want or need may be the best decision. There are high-deductible plan types with Health Savings Accounts that might be perfect for some people, while others will want coverage that includes lower deductibles and co-pays.

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